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Video Game Sales Slump Again - Analyst Blog

Video game retail sales declined for the eleventh consecutive
month in October 2012. According to market research firm NPD, U.S
video game store sales slumped 25.0% year over year to $755.5
million in the month of October.

The year-over-year decline widened compared with the
prior-month level and dollar sales also decreased from $843.3
million reported in September. The weak retail sales were
primarily due to the ongoing transition from physical to digital
platform and aging hardware consoles.

Hardware sales plunged 37% year over year to $187.3 million
while total software sales declined 25.0% year over year to
$432.6 million. Including PC games, total software declined 25.4%
year over year to $451.8 million in October.

However, accessories sales increased 5.0% year over year to
$135.6 million. The growth was primarily driven by strong sales
of
Skylanders Giants
accessories, the new game from
Activision Blizzard Inc. (
ATVI)
, which has a Zacks #1 Rank that implies a "Strong Buy" rating
over the next 3-6 months.

According to NPD,
NBA 2K13
from
Take-Two Interactive (
TTWO)
topped the game sales chart pushing September topper
Madden NFL 13
from
Electronic Arts (EA)
to #6 spot in the top 10 list. Both Take-Two and EA carry a Zacks
#3 Rank, which implies a "Hold" rating over the next 3-6
months.

Resident Evil 6
from Capcom was placed at #2, while Nintendo's new release
Pokemon Black
version 2 grabbed the #3 spot. Notably, EA had two other games in
the top 10, with
FIFA Soccer 13
at #7 and its just released
Medal of Honor: Warfighter
debuting at #8.

On the hardware front,
Microsoft Corp's (
MSFT)
Xbox 360 was again the top-selling console for the twenty second
straight month (according to Bloomberg) with 270K units sold.
Currently, Microsoft has a Zacks #3 Rank that implies a "Hold"
rating over the next 3-6 months.

We believe that the upcoming holiday season will boost video
game sales over the next couple of months. Newly released games
such as EA's
Medal of Honor: Warfighter
and Microsoft's
Halo 4
and upcoming releases from Ubisoft (
Assassin's Creed III
) and Activision (
Call of Duty: Black Ops
) will be the key growth factor in our view.

However, declining consumer spending on video games and the
continued rapid adoption of free-to-play games remain the main
headwinds over the long term. Although, we believe that the
ongoing transition from the physical to the digital platform will
ultimately benefit the video game industry (due to the cost
effectiveness), low priced digital games have failed to offset
the rapid decline of high priced retail sales in recent
times.

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